How to Price Your Products on Shopify as a Beginner
The tools and products on Shopify are amazing for businesses, but one of the hardest things to do is price your products. Keep in mind that pricing too high can lead to customers not purchasing your product. While pricing too low can lead customers to not value your product or service.
Hit the right balance between the two, and you're well on your way to running a successful online business.
Why Have a Pricing Strategy?
A pricing strategy is a proven and cost-effective way to ensure the profitability of a business. The pricing strategy involves developing a price list and determining the prices for all products within the range. A pricing strategy should be developed with an understanding of customer needs and competitor offerings. That way, your business can offer competitive pricing that will entice new customers to do business with you.
What to Know Before Creating a Strategy
In order to set your prices in a fair yet profitable range, there are a few factors you'll want to consider. These include the cost of:
Products The basic price per product should be based on many factors, including supplier price (the price you're paying for the product at wholesale), product demand, and competition from other vendors selling similar products or services.
Shopify The cost of running a Shopify store has its own set fee structure, which varies depending upon your business's unique requirements and how much they're willing to spend.
Fulfillment All the costs involved in receiving and distributing products like picking, packing, and shipping are additional costs you'll have to consider.
Business Additional costs like insurance, staff wages, and marketing expenses are more expenses that will affect your pricing points.
Top Pricing Strategies for Your Shopify Products
So, how should you determine product pricing? There are two top pricing strategies that you should consider when designating prices for your Shopify products.
1. Keystone Pricing
Many online stores use this pricing strategy because of its simplicity and effectiveness. All a retailer does is double the wholesale cost of a product to set its price point.
2. Cost-Plus Pricing
To set a product price, the wholesale price is taken, and a set percentage is added on top to determine its final price point. For example, you may decide you'd like to see a specific product with a 20% increase on what you paid for it. Your final price would then be 120% of the wholesale cost.
Experiment With Pricing
You can also play around with prices to gain more insight into what may and may not work for your business. For example:
Seasonal specials If your business has seasonal fluctuations in demand or seasonality factors (perhaps Christmas or Halloween), having a trial run where customers are offered something at an introductory rate could help determine how much they're willing or not willing to pay.
Popular items The price of in-demand products can be manipulated to match customer demand, allowing for bigger profit margins.
Flexible pricing like this is termed pricing elasticity. The benefits of price elasticity are that it is a measure of how demand reacts to changes in the price. The more elastic the demand, the more responsive it is to changes, and vice versa for inelastic demand.
Track Your Shopify Business’ Metrics
Using tracking and analytics applications, like a product pricing calculator such as OriginalPO, can create better insight into where you should be setting your business's product prices. It also gives an indication as to what products could potentially have some room left over; these under-utilized items become great targets when considering new promotions with customers at any given point during their purchase cycle.
Pricing Is Personal
There is no set answer for a pricing plan that works best in all situations. It depends heavily upon personal experience, product value, and market conditions. Metrics can be used to maximize profits and customer satisfaction while balancing out the costs of doing business.
Additionally, your pricing strategy can evolve and grow as your business does. What prices you choose is up to what you determine works best for your business, which will take some experimentation to figure out.
Our Tool Assists Shopify Merchants in Boosting Their Revenue
Simply put, OP is designed to make Pricing Optimization capabilities available to everyone. It is intuitive, simple, and easy to start working with, speeding up the process of increasing profitability in a perpetually shifting landscape of the contemporary marketplace.